FIFO means that you will use the oldest products first. This is advantageous for storeroom purposes and for avoiding spoilage. However, in times of rapid inflation, a FIFO system causes an overvaluation of your inventory.

Question

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In times of rapid inflation, the cost of purchasing new inventory may be higher than the cost of the oldest inventory on hand, causing an overvaluation of the inventory when using a FIFO system.

FIFO Means That You Will Use the Oldest Products First